I was pleased earlier this year when the government set aside £200m to match private monies for English university endowments. "Yippee, free money for Buckingham!" I thought. But the government has now excluded one, and only one, English university. Buckingham. Only Hefce-funded universities need apply. At that point I began to realise - joking apart - that the scheme is a disgrace.

The consultation document says that the scheme is designed to incentivise universities' fundraising. Excuse me, but do people need to be incentivised to earn money? Does Bill Gates need to be incentivised to market Microsoft? Does BP need to be incentivised to sell petrol? Fundraising is obviously an activity of self-interest, so why is the taxpayer being fleeced on behalf of the universities?

Moreover, the scheme is biased against institutions that are good at fundraising. So Oxford and Cambridge will have to raise £3 privately for every £1 they receive from the government, whereas Southampton Solent will need to raise only £2. There may be other discriminatory caps as well. Unlike the market place, therefore, the scheme will reward failure and punish success; is that fair on the taxpayer?

Finally, the scheme is apparently illegal. It involves the gifting in perpetuity of taxpayers' money to institutions that are private and independent (because, of course, every British university is private and independent). That, in itself, is not illegal - though it seems casual with taxpayers' money - but it becomes illegal when eligibility is restricted to universities that have signed a financial memorandum with Hefce.

Financial Memoranda last only a year. Many of today's Hefce-funded universities will one day not renew their memoranda. Indeed, paragraph 1.2 of the consultation document states that the intention of the matching scheme is to provide the universities with "greater financial independence", which will inevitably lead to some universities breaking away from Hefce.

To give taxpayers' money only to those universities that have signed a financial memorandum with Hefce means that, in equity, any Hefce-funded university that decides, one day, not to renew its financial memorandum will have to return the donation (plus interest, plus the gift-aid element, plus the interest on that). The discussion document does not acknowledge such an obligation and, until it does, the scheme should be subject to judicial review.

Talking to ministers seriously about university governance is hopeless. When I explain, for example, that the best universities in the world are the independent universities of the American ivy league, I provoke a sulk. But ministers have led miserable lives, having spent years grovelling to voters and whips, so they are looking for fun in office. The universities are their train sets, and they want to play with them. A few hundred million here for one scheme, mountains of vice-chancellorial deference there for another, and soon the years of grovelling begin to pay off. University independence would throw the train sets out of the ministerial prams.

But talking seriously to other vice-chancellors about university governance is hopeless, too. For them the government is the cash cow, and any public reflection might threaten those juicy teats. Indeed, I was appalled by how swiftly I myself, the sea-green incorruptible of the university world, was corrupted by the prospect of an unaccountable million or two of taxpayers' money.

There is no shortage of government money in British higher education and research. The various funding councils spend some £12bn annually. With those billions, we could achieve both university independence and social justice. Hefce could be converted into a national needs-blind fees agency, giving money solely to students; and its RAE/QR money could be transferred to the research councils.

Once free of direct government support, the universities could cease grovelling to power and start speaking truth to it instead. And they would be powerfully incentivised to raise endowment funds.